The end of an era for U.S. dairy pricing

A new report from Rabobank says “the U.S. dairy industry has ended a decades-long period of isolation.” The report says the growing volume of exports has pushed the U.S. into becoming part of the global market and with that, subject to international prices.

Released by Rabobank’s Food & Agribusiness Research and Advisory (FAR) group. The report, entitled “Dysrhythmia,” predicts that the U.S. dairy market can no longer depend on the predictable market cycles it had become accustomed to in the 1990s and through the mid-2000s.

“With an exposure to the world market comes extreme diversity and volatility – including factors such as income growth in the developing world, dietary shifts, product contamination, shifting regulation and currency strengths in import regions.”

In addition, the growing volatility and overall higher trading range in feed prices is making it more difficult for producers to secure margins. With that in mind, Rabobank recommends U.S. dairy operations “can embrace this new challenge including locking in the prices of milk and feed through the use of listed future contracts and/or forward contracts.”